WTO sides with U.S. on China’s rare-earth export restraints

A World Trade Organization dispute settlement panel on Wednesday sided with the United States in favor of its claims that China’s export restraints on rare earth metals, tungsten and molybdenum breach WTO rules.
Rare earths, tungsten and molybdenum are used in a variety of U.S-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals.
“China’s decision to promote its own industry and discriminate against U.S. companies has caused U.S. manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths,” said U.S. Trade Representative Michael Froman in a statement. “WTO rules prohibit this kind of discriminatory export restraint and this win today, along with our win two years ago in an earlier case, demonstrates that clearly.”
The Chinese export restraints challenged in the U.S. government’s dispute include export duties and quotas, as well as related export quota administration requirements.
“These types of export restraints can skew the playing field against the United States and other countries in the production and export of downstream products. They can artificially increase world prices for these raw material inputs while artificially lowering prices for Chinese producers. This enables China’s domestic downstream producers to produce lower-priced products from the raw materials and thereby creates significant advantages for China’s producers when competing against U.S. and other producers both in China’s market and other countries’ markets,” the Office of the U.S. Trade Representative explained.
On March 13, 2012, the United States requested WTO dispute settlement consultations with China regarding export restraints maintained by China on various forms of rare earths, tungsten and molybdenum. On the same day, the European Union and Japan also requested consultations with China.
On July 23, 2012, a single WTO panel was established to examine the three complaints. Argentina, Brazil, Canada, Colombia, India, Indonesia, Korea, Norway, Oman, Peru, Russia Saudi Arabia, Taiwan, Vietnam, and Turkey joined as third parties in the dispute.
China argued in defense that its imposition of export duties and export quotas was justified under exceptions in the 1994 GATT related to environmental protections (export duties) and measures to conserve “exhaustible” natural resources (export quotas).
Under WTO rules, the dispute panel’s report may be adopted or appealed within 60 days of its circulation.
The rare earth export restraints dispute builds on an earlier victory that the United States achieved in 2011 challenging China’s use of export restraints on a different set of raw material inputs used in the steel, aluminum and chemicals industries, such as bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous and zinc.